forgotten drips that have grown?

[Birchwood]

About 25 years ago, I began investing in about 15 stocks thru dividend reinvestment plans.So it was $50-100, here and there until I got tired and move on to other investments. Although I received statements, and would add periodically according to whims, I have forgotten about it until now when I am about to retire. When I gathered all the recent statements, I am pleasantly surprise that like a tree, some have grown a lot.
In total it is worth about 350K.
The companies Are Exxon-Mobil, McDonalds, 3M, Walgreens, Walmart,
Conagra, CSX, Wells Fargo, Pepsi, Merck, Sara Lee, Duke energy,
Edison Int, Waste Management, GE.

My accountant said, keep it, and sell them slowly only when I need the money. They are taxed as capital gains(?).

Any suggestions? Right now I'm just hanging on. I may even add $50 here and there! Any idea?

[LOL!]

You are lucky that your accountant can even figure out the cost basis to these things. Most folks lose all records of how much they paid for the shares and thus have no idea what the cost basis is.

Also, why pay taxes on the gains? If you give away the shares to charity or die, then no taxes on the gains. That's probably simplest.

I'd stop automatically re-investing the dividends and instead use them to rebalance or just spend them.

[jebmke]

Quote:

Originally Posted by LOL! You are lucky that your accountant can even figure out the cost basis to these things.

Not clear to me from OP that this is true.

[LOL!]

I suppose I should've suffixed a smiley or something to such a statement.

[NW-Bound]

I have a similar situation with 4 MFs that I accumulated by automatic withdrawal from my checking account every month. The period of investment was from the late 80 to 2000. Yes, I also reinvested all distributions, cap gains as well as dividends that were paid out.

In 2000, I stopped the automatic investment, and transferred them into a brokerage account. I guess if I left them with the MFs, they could have computed the basis for me. The brokerage house of course would not know the basis of these MF shares.

Just last year, I sat down and tallied up all those monthly investments of many years ago, and also all reinvestments of cap gains and dividends. Yes, I kept records of everything, even though I often not looked at them. So, now I know their basis.

What is interesting is this. Although I put equal amounts into these 4 MFs, as they stand now, the largest one (best performance) has the value almost 2X the smallest one (poorest performance). My tax liabilities on the two poorest performance MFs are negligible, although I had some gains on them. What happened was that the original shares were bought with after-tax money, and I also already paid taxes on the reinvested shares. On the other hand, the two higher-value MFs have more than 40% in unrealized cap gains.

And here is an interesting fact. Up until 2000, these 4 MFs appreciated in lock steps. When I transferred them into the brokerage account, they were within 5% of one another. They all crashed after 2000 tech bust, but two recovered, while the other two have not done that well. I bought these 4 from 2 MF companies, and got one winner out of each of them.

[GrayHare]

Quote:

Originally Posted by Birchwood My accountant said, keep it, and sell them slowly only when I need the money. They are taxed as capital gains(?).

An increase in value in such assets is called a Capital Gain. Such gain is taxed only in the tax year in which you sell the asset. The tax on a Capital Gain is usually a lower percentage than if the gain had come from ordinary income, such as a paycheck.

[MichaelB]

Quote:

Originally Posted by Birchwood About 25 years ago, I began investing in about 15 stocks thru dividend reinvestment plans.So it was $50-100, here and there until I got tired and move on to other investments. Although I received statements, and would add periodically according to whims, I have forgotten about it until now when I am about to retire. When I gathered all the recent statements, I am pleasantly surprise that like a tree, some have grown a lot. In total it is worth about 350K. The companies Are Exxon-Mobil, McDonalds, 3M, Walgreens, Walmart, Conagra, CSX, Wells Fargo, Pepsi, Merck, Sara Lee, Duke energy, Edison Int, Waste Management, GE. My accountant said, keep it, and sell them slowly only when I need the money. They are taxed as capital gains(?). Any suggestions? Right now I'm just hanging on. I may even add $50 here and there! Any idea?

You found $350k you had forgotten? That's a nice surprise.

When you sell your tax rate will be 15% on the gain, which sounds like a lot. If you occasionally give money to charity, consider giving shares of this appreciated stock instead. You can give 1 share at a time, your deduction is the full fair market value, and yo pa no tax on the accrued gain.

[52andout]

Quote:

Originally Posted by MichaelB You found $350k you had forgotten? That's a nice surprise.

and to think I got excited when I found a quarter vacuuming the car yesterday

[jebmke]

Quote:

Originally Posted by LOL! I suppose I should've suffixed a smiley or something to such a statement.

Ah, missed that. Long day. Did 12 tax returns at TaxAide today.

We see a lot of seniors come in with DRIPs. Many times we have no info on the basis and have no choice but to use the initial purchase (best case) or zero (worst case, but probably the majority). Fortunately(?) many of them are zero CG bracket taxpayers so it ends up not making a difference but sometimes it does.

[ChiliPepr]

Quote:

Originally Posted by MichaelB When you sell your tax rate will be 15% on the gain, which sounds like a lot.

If you sell this year.... Since tax rates change every year it is possible that it may be more (or less ) next year.

[ronocnikral]

so, has the OP forgotten to pay tax on the dividends all these years? or does that not matter?

[seraphim]

We forgot about my wife's 403b because it was removing small amounts automatically from her pay check. Looked the other day and it was $62000.

[MichaelB]

Quote:

Originally Posted by ronocnikral so, has the OP forgotten to pay tax on the dividends all these years? or does that not matter?

I imagine if they are in taxable accounts the dividend payer would have sent out 1099-div and the IRS would have spoken up.

[ronocnikral]

it would be incredibly difficult for me to miss ~$7500+ in dividend payments each year. but, we each obsess over different things....

[jclarksnakes]

Looking at that list of companies I would say that your drips were overall pretty darned smart.

[NW-Bound]

When it comes to taxes that are due, the taxpayer might forget , but the IRS never does. Case in point follows.

In 2007, I cashed out a couple of I-bonds. I never did receive the 1099 from the Treasury, or perhaps it was lost in the mail. As this was not a recurrent event such as 1099s from my brokerage accounts, I did not miss it and truly forgot all about the tax liability on that I-bond interest.

In 2010, I received a dunning letter from the IRS. It told me about the unreported interest, the tax due on it, and how much interest I also owed on the late tax. Thank goodness there was no penalty. Of course, one would be dumb to evade taxes on interests paid by the US Treasury (IRS is a department of the US Treasury). Duh!

So, of course I paid up quickly.

The IRS letter also mentioned that they would report this to the state, and that I'd better file an amendment with the state also. Well, as the I-bond interest was exempt from state tax, I figured why bother.

Just a month ago, I received a letter from the state Revenue Department. It said, "You owe us money. Pay up!". I just sent in a letter to explain the situation, along with some statements downloaded from treasury.gov Web site to show that the interests in question were indeed state-tax exempt, and have not heard from them.

So, the tax payer may forget, but the tax collector rarely does.

By the way, in one year, I made a mistake in my return that resulted in me paying more than what was due. I did not discover that until the next year, when I compared the tax of one year to the next. It was a really dumb error of mis-typing in an amount from a W2 form. So, I filed a tax amendment and got a few hundred back. I wondered had I waited, if the IRS would alert me of my error and refund me the money.

[Birchwood]

Well, thanks for all the comments. I'll probably hang on to them, and when I need the money later, I will sell the drips one by one, and pay whatever taxes I owe.
I think I paid whatever taxes owed on these. We have been using the same accountant for the last 20 years and all statements from all our investments come to her. We haven't been audited yet.

Those DRIPS were more common many years ago, when having a single share ,allows you to participate in the program, that allows you to buy additional shares without going to a broker. Instead it goes to the company's transfer agent. Any dividend, given to your name, plows right back to buy additional shares. During that 1980's, it was an easier way to buy into big established companies. It may not apply now??

In the case of 3M, I remember buying little by little, and then received
statements that it was "splitting: predictably once price goes to about $90- doubling my shares. Everytime I received a dividend statement,
I noted that I am receiving about additional 5-8 shares to the pot.
I have to note that I did not sell any shares out of it. I kept all of them.

In the case of some the stocks, they haven't done well for many years, then they start to move. Some stayed the same or lose value.

Overall a few big winners made the difference.

[Nords]

Quote:

Originally Posted by jclarksnakes Looking at that list of companies I would say that your drips were overall pretty darned smart.

Survivor bias-- the dumb companies would either be out of business... or the investors would never talk about them.

Quote:

Originally Posted by NW-Bound In 2007, I cashed out a couple of I-bonds. I never did receive the 1099 from the Treasury, or perhaps it was lost in the mail. As this was not a recurrent event such as 1099s from my brokerage accounts, I did not miss it and truly forgot all about the tax liability on that I-bond interest. By the way, in one year, I made a mistake in my return that resulted in me paying more than what was due. I did not discover that until the next year, when I compared the tax of one year to the next. It was a really dumb error of mis-typing in an amount from a W2 form. So, I filed a tax amendment and got a few hundred back. I wondered had I waited, if the IRS would alert me of my error and refund me the money.

I've had to download 1099s from TreasuryDirect. I don't know if they even mail them out.

Even worse, for paper bonds that have been converted to electronic bonds and later redeemed, TreasuryDirect puts the 1099 in a separate account. The only reason I eventually found that 1099 is because I knew it had to be there somewhere.

In the IRS' defense, one year my daughter completed her tax return without including the estimated taxes that she'd already paid. The IRS politely pointed out her mistake and immediately credited her checking account.

[jayc]

Check into the different ways to redeem/sell the shares at the different DRIP holding companys. Sometimes it is best to get a certificate for the shares (cost $15) vs having them sell the shares (commission > $100). You can then deposit the shares with your discount broker and get dinged a lot less on commissions. You also have control over the sell price.

[Birchwood]

Thanks, I'll check on that when it's time to sell.
The transfer agents, usually big banks like Wells Fargo, and
BNYMellon, had different ways to redeem or sell the shares.
I'm sure there will be some transactional expenses, but after all these years, that's fine.